Intellectual Property
Information on the U.S. Patent and Trademark Office's Past and Future Operations Gao ID: GAO-02-907 August 23, 2002The U.S. Patent and Trademark Office (USPTO) has a staff of 6,426 and collected $1.1 billion in patent and trademark fees in fiscal year 2001. As the U.S. economy depends increasingly on new innovations, the need to patent or trademark quickly the intellectual property resulting from such innovations becomes more important. Expressing concerns about USPTO's plans for the future, Congress directed USPTO to develop a 5-year plan. In February 2001, USPTO issued its first 5-year plan, called the USPTO Business Plan. Because the Director of USPTO did not believe that the Business Plan went far enough, in June 2002, USPTO produced another 5-year plan, called the 21st Century Strategic Plan. GAO found that patent activity grew substantially from 1990 through 2001. The numbers of patent applications filed and patents granted nearly doubled; the inventory of patent applications nearly tripled; patent pendency increased from slightly over 18 months to nearly 25 months, and the number of patent examiners increased by about 80 percent. Furthermore, in fiscal year 2001, both fee collections and agency funding requirements exceeded $1 billion for the first time in the agency's history. Although both 5-year plans cover the same period, the assumptions and projected results of the Business Plan are different in several ways from the Strategic Plan. The administration's recent legislative proposal to restructure patent fees to implement the Strategic Plan would result in higher fees for the majority of patent applications--large entities--that receive utility patents and maintain such patents in to the future. Consequently, total fees for these applicants would increase by $4,100 or 51 percent. Also, total fees for most small entities would increase $2,700 or 67 percent over current fees.
GAO-02-907, Intellectual Property: Information on the U.S. Patent and Trademark Office's Past and Future Operations
This is the accessible text file for GAO report number GAO-02-907
entitled 'Intellectual Property: Information on the U.S. Patent and
Trademark Office's Past and Future Operations' which was released on
September 18, 2002.
This text file was formatted by the U.S. General Accounting Office
(GAO) to be accessible to users with visual impairments, as part of a
longer term project to improve GAO products‘ accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
Report to Congressional Requesters:
United States General Accounting Office:
GAO:
August 2002:
Intellectual Property:
Information on the U.S. Patent and Trademark Office‘s Past and Future
Operations:
Past and Future Operations:
GAO-02-907:
Contents:
Letter:
Results in Brief:
Background:
USPTO‘s Past and Future Operations:
Some Differences between the Business and Strategic Plans:
Patent Fee Structure Would Change under Proposed Legislation:
Agency Comments:
Scope and Methodology:
Appendix I: USPTO fee structure Information Used in Briefings for
the Chairman of the Joint Economic Committee and Representative Lamar
Smith:
Appendix II: Comments from the United States Patent and
Trademark Office:
Tables:
Table 1: USPTO Projections of Patent Pendency under Different
Assumptions in the Business Plan and the Strategic Plan (Fiscal Years
2003-2008):
Table 2: Example of How the Basic Patent Fees Would Change for a Small
Entity Granted a Utility Patent, and Maintaining the Patent through the
Three Maintenance Fees:
Letter:
August 22, 2002:
The Honorable Jim Saxton
Chairman, Joint Economic Committee
House of Representatives:
The Honorable Lamar Smith
House of Representatives:
The U.S. Patent and Trademark Office (USPTO), which administers U.S.
patent and trademark laws, had a staff of 6,426 and collected about
$1.1 billion in patent and trademark fees in fiscal year 2001. Patent
and trademark laws protect inventors‘ and businesses‘ inventions and
encourage innovation and the scientific and technical advancement of
American industry through the preservation, classification, and
dissemination of patent information. As the U.S. economy depends
increasingly on new innovations, the need to patent or trademark
quickly the intellectual property resulting from such innovations
becomes more important.
The patent process begins with an applicant filing a patent application
with USPTO and paying a filing fee. This step begins the patent
examination process. An applicant may be a small or large entity--small
entities, which pay reduced fees in many instances, include
organizations with 500 or fewer employees, non-profit organizations,
and independent inventors, whereas large entities, according to USPTO
officials, include all others. As part of the examination process a
patent examiner searches United States and foreign patents, journals,
and other literature, and sometimes contacts the applicant to resolve
questions and obtain additional information to determine the proposed
invention‘s potential patentability. A proposed invention is patentable
if it is a new and useful process, machine, manufacture, or composition
of matter, or any new and useful improvement thereof. If the examiner
decides that a patent is warranted, the applicant is informed and, upon
payment of an ’issue fee,“ USPTO grants a patent. The applicant may
abandon the application any time during this process. If a patent is
granted, the patent holder has, in most instances, a patent term of 20
years from the date the application was filed. To keep the patent
active, the applicant must pay maintenance fees at 3.5 years, 7.5
years, and 11.5 years. Historically, the time from the date that a
patent application is filed to the date that either the patent is
granted or the application is abandoned has been called ’patent
pendency.“:
In April 2001, USPTO estimated in its Fiscal Year 2002 Corporate Plan-
-which was part of the agency‘s fiscal year 2002 budget submission and
included some performance information covering fiscal years 2002
through 2006--that patent pendency would increase from 25 months in
fiscal year 2000 to over 38 months in fiscal year 2006.[Footnote 1]
Expressing concern about USPTO‘s plans for the future, the Congress
directed USPTO in November 2001 to develop a 5-year plan, among other
things, to improve patent quality and reduce patent and trademark
pendency. In February 2002, USPTO issued its first 5-year plan, which
was called the USPTO Business Plan and covered fiscal years 2003
through 2007. This plan included nine operating initiatives focused on
improving patent timeliness and quality. For example, the plan included
hiring hundreds of new patent examiners each year to handle new patent
applications. The plan also identified changes to the fee structure,
including a one-time surcharge on patent and trademark fees in fiscal
year 2003 to begin paying for the new initiatives. The Business Plan
was developed before the new Under Secretary of Commerce for
Intellectual Property and Director of the United States Patent and
Trademark Office (hereafter referred to as the Director) assumed office
in December 2001. Consequently, the new Director viewed the Business
Plan as only the first step toward a long-range strategy to strengthen
the patent and trademark system.
Because the new Director did not believe that the Business Plan went
far enough, he conducted a review of the USPTO to identify new ways to
improve quality and reduce pendency. Based upon the results of that
review, in June 2002 USPTO produced another 5-year plan--called The
21st Century Strategic Plan. Like the Business Plan, it covered fiscal
years 2003 through 2007. However, the Strategic Plan used different
assumptions than the Business Plan about some key factors, such as the
expected number of patent applications to be filed, and included major
operating and fee changes that were more aggressive than those in the
Business Plan. According to USPTO, the Strategic Plan proposed
fundamental changes in the way the agency operates, such as
restructuring the patent fee schedule and redesigning the patent search
and examination system. For example, instead of applicants paying one
fee that covers filing and examination, applicants would pay a filing
fee and then decide whether to request and pay for an examination.
Additionally, the Strategic Plan‘s success was linked to enactment of
the President‘s fiscal year 2003 budget, legislation to change USPTO‘s
current fee schedule, revisions to current rules, and legislation for
streamlining the patent and trademark system. The administration
released its fee legislation proposal on June 20, 2002.
In this context, you asked for information on (1) USPTO‘s past and
future operations, particularly patent applications filed, patents
granted, patent application inventory, patent pendency, patent examiner
staffing, and fee collections and funding requirements (agency
appropriations); (2) some of the differences between USPTO‘s Business
and Strategic Plans; and
(3) changes in the patent fee structure under proposed legislation. The
results of our work are summarized in this report. Appendix I presents
the information we used to brief your offices on July 12 and 25,
2002.[Footnote 2]
Results in Brief:
Patent activity grew substantially from fiscal year 1990 through 2001.
The numbers of patent applications filed and patents granted nearly
doubled, and the inventory of patent applications more than tripled;
patent pendency increased from slightly over 18 months to nearly 25
months; and the number of patent examiners increased by about 80
percent. Furthermore, in fiscal year 2001, both fee collections and
agency funding requirements exceeded $1 billion for the first time in
the agency‘s history. Moreover, projections in USPTO‘s Corporate,
Business, and Strategic Plans indicate future increases in the number
of patent applications filed and the number of patents granted. Also,
projections in the Business and Strategic Plans show future increases
in the number of patent examiners and fee collections and funding
requirements.
While both 5-year plans cover the same period, the assumptions and
projected results of the Business Plan are different in several ways
from the Strategic Plan. For example, the Business Plan projected that
pendency in fiscal year 2007 would increase by less than a month
compared to pendency in fiscal year 2001, while the Strategic Plan
projected pendency would decrease by more than 4 months during that
period. However, some of the pendency reduction projected in the
Strategic Plan would result from changing the pendency definition in
conjunction with proposed changes to the patent system. In addition,
through fiscal year 2007, the number of patent examiners hired under
the Business Plan would have been about 2,100 more than under the
Strategic Plan. Fewer patent examiners would be needed under the
Strategic Plan partly because examiners would in many cases be relying
on others outside of USPTO to perform a search of patent records and
other published information. Furthermore, legislative and regulatory
changes to restructure patent and trademark fees would be implemented
by October 1, 2002, under the Strategic Plan, not in fiscal year 2004
as proposed in the Business Plan. Finally, projected USPTO funding
requirements for fiscal years 2003 through 2007 would total about $539
million less under the Strategic Plan than under the Business Plan as a
result of changing assumptions, such as fewer patent applications would
be filed and fewer patent examiners would be needed.
The administration‘s recent legislative proposal to restructure patent
fees to implement the Strategic Plan would result in higher fees for
the majority of patent applicants--large entities--that receive utility
patents and maintain such patents into the future. While these
applicants would pay lower fees when filing applications than required
under the current fee structure, applicants that request USPTO to
conduct an examination would have to pay a new $1,250 examination fee
and a higher fee for issuing the patent. And those that decide to keep
their patents active in the future would pay higher fees to maintain
them. Consequently, total fees for these applicants would increase by
nearly $4,100, or 51 percent. Also, total fees for most small entities
would increase nearly $2,700, or 67 percent, over current fees.
We provided a copy of our draft report to USPTO for review and comment.
USPTO responded that the factual information in our draft report
provides a good picture of USPTO‘s transition to its new Strategic
Plan. USPTO‘s comments are presented in appendix II.
Background:
Located within the Department of Commerce, USPTO administers U.S.
patent and trademark laws while ensuring the creation of valid, prompt,
and proper intellectual property rights. According to the Strategic
Plan, USPTO‘s mission is to ensure that the intellectual property
system contributes to a strong global economy, encourages investment in
innovation, fosters entrepreneurial spirit, and enhances the quality of
life. USPTO also advises the administration on all domestic and global
aspects of intellectual property.
USPTO management consults with a Patent Public Advisory Committee and a
Trademark Public Advisory Committee. These committees are comprised of
voting members from the private sector and non-voting members from the
three unions represented at USPTO--the Patent Office Professional
Association and two chapters of the National Treasury Employees Union.
The committees not only review USPTO policies, goals, performance,
budget, and user fees related to patents and trademarks, but also issue
annual reports to the President, the Secretary of Commerce, and the
House and Senate Committees on the Judiciary.
Fees and volume of patent activity are different for small and large
entities. Small entities receive a 50 percent discount on many patent
fees. The majority of patent applicants are large entities filing
applications for utility patents. USPTO has estimated that in recent
years patent applications from large entities have comprised over 60
percent of all patent applications received; small entities have
accounted for the remainder. In fiscal year 2001, utility patents
represented over 90 percent of all patents granted that year.
USPTO‘s Past and Future Operations:
Patent Applications Filed:
The number of patent applications filed nearly doubled during fiscal
years 1990 through 2001, increasing from about 164,000 to about
326,000, and USPTO‘s Corporate, Business, and Strategic Plans projected
that the number of applications would increase to between 351,000 and
368,000 in fiscal year 2002. Moreover, each plan projects that the
number of applications will increase in the future--10 percent annually
under the Corporate and Business Plans and 5 percent annually for
fiscal years 2003 and 2004 and 7 percent annually for fiscal years 2005
through 2007 under the Strategic Plan. The Corporate Plan projected
that the number of applications would increase to about 539,000 in
fiscal year 2006; the Business and Strategic Plans project that the
number of applications filed will increase in fiscal year 2007 to about
593,000 and 454,000, respectively. The lower projection under the
Strategic Plan reflects the reduced number of applications expected for
fiscal years 2002 and 2003 due, in part, to a slowdown in the economy.
For fiscal year 2002, the Business Plan assumed an application growth
rate of about 12 percent and the Strategic Plan assumed a growth rate
of 3 percent; for fiscal year 2003, the growth rate projected by the
Business and Strategic Plans were 10 percent and 5 percent,
respectively. The application growth rate is a key factor in projecting
business indicators, such as pendency, staffing needs, and funding
requirements. For example, if the number of applications decreases, the
number of examiners needed to process those applications decreases.
(See app. I, p. 20.):
Patents Granted:
The number of patents granted increased by over 90 percent during
fiscal years 1990 through 2001, increasing from about 90,000 to about
171,000, and USPTO‘s three plans projected that the number would
increase to a range of about 167,000 to 171,000 in fiscal year 2002.
Furthermore, the three plans project that the number of patents granted
will increase in the future. The Corporate Plan projected that the
number of patents granted would increase to about 192,000 by fiscal
year 2006, and the Business and Strategic Plans project that the number
of patents granted will increase in fiscal year 2007 to about 314,000
and 374,000, respectively. (See app. I,
p. 21.):
Patent Application Inventory:
USPTO‘s inventory of unprocessed patent applications increased by
nearly 250 percent from fiscal year 1990 to 2001, increasing from about
96,000 to about 332,000, and USPTO‘s three plans projected that the
inventory would increase to between 393,000 and 512,000 in fiscal year
2002. The Corporate and Business Plans also project increases in the
future, while the Strategic Plan projects a decrease. The Corporate
Plan projected that the application inventory would increase to almost
1.3 million by the end of fiscal year 2006, and the Business Plan
projects that the inventory would increase to about 584,000 through
fiscal year 2007. The Strategic Plan, which would speed up some of the
proposed changes in the Business Plan and make other fundamental
changes, projects that the inventory will decrease to about 144,000
through fiscal year 2007. The decrease projected in the Strategic Plan
reflects several changes in assumptions, including fewer new patent
applications. (See app. I, p. 22.):
Patent Pendency:
Patent pendency increased from 18.3 months to 24.7 months between
fiscal years 1990 and 2001. Projections of patent pendency beyond
fiscal year 2001 vary widely under USPTO‘s three plans. USPTO‘s three
plans projected that pendency would increase to between 26.1 months and
26.7 months in fiscal year 2002. The Corporate Plan projected that
pendency would be 38.6 months in fiscal year 2006, and the Business and
Strategic Plans project it will be 25.5 months and 20.3 months,
respectively, in fiscal year 2007. According to USPTO officials,
pendency time in the Strategic Plan reflects a proposed fundamental
redesign of the patent search and examination system. (See app. I, p.
23.):
Patent Examiner Staffing:
The number of patent examiners on board at the end of the fiscal year
increased from 1,699 to 3,061, or about 80 percent, from fiscal year
1990 to 2001. During this period, USPTO annually hired an average of
380 new examiners and lost an average of 236 examiners through
attrition. Further, USPTO‘s Business and Strategic Plans projected that
the number of examiners on board at the end of fiscal year 2002 would
be 3,435 and 3,595, respectively.[Footnote 3] Moreover, both plans
project increases in the number of examiners through fiscal year 2007-
-to 5,735 in the Business Plan and to 4,322 in the Strategic Plan. (See
app. I, pp. 24-26.):
Fee Collections and Funding Requirements:
Between fiscal years 1999 and 2001, fee collections increased from
$887 million to $1.085 billion and funding requirements (USPTO‘s
appropriations) increased from $781 million to $1.039 billion. For
fiscal year 2002, the Business and Strategic Plans projected fee
collections of $1.373 billion (includes $27 million for employee
pension and annuitant health benefits proposed by the President) and
$1.198 billion, respectively, and both plans projected that funding
requirements would be
$1.128 billion. Further, fee collections and funding requirements are
projected to increase in the future under both plans, but at different
rates. Under the Business Plan, fee collections are projected to
increase from $1.527 billion in fiscal year 2003 to $2.078 billion in
fiscal year 2007, and funding requirements are projected to increase
from $1.365 billion to $2.078 billion during the same time period.
Under the Strategic Plan, fee collections are projected to increase
from $1.527 billion in fiscal year 2003 to $1.823 billion in fiscal
year 2007, and funding requirements are projected to increase from
$1.365 billion to $1.823 billion during that period. (See app. I, pp.
27-28.):
Some Differences between the Business and Strategic Plans:
There are a number of differences between USPTO‘s Business and
Strategic Plans, as shown in the following examples. (See app. I, p.
29.):
* The patent pendency definition is different under each plan. Under
the Business Plan, pendency is measured from the date an application is
filed. However, under the Strategic Plan, pendency would be measured
from the date an applicant pays the examination fee. According to USPTO
officials, this definition is different than the definition under the
Business Plan because of the proposed fundamental redesign of the
patent search and examination system. Also, according to the Strategic
Plan, this definition is the same measure--the examination duration
period--used by the European Patent Office and the Japan Patent Office.
This change in definition is partly responsible for the reduction in
pendency under the Strategic Plan. Historically, applicants have paid a
single fee that covered filing and examination; under the Strategic
Plan there would be separate filing and examination fees. The applicant
has two options for paying fees under the Strategic Plan. Under the
first option, applicants may elect to pay the patent application fee
and examination fee at the same time. Under the second option,
applicants may elect to pay the application fee and defer examination
and paying the examination fee for up to 18 months. According to USPTO,
applicants that take advantage of the deferred examination do so for
various reasons, such as to decide the merits of pursuing the patent or
to avoid the early expenditure of funds. USPTO estimates that about 9
percent of all applicants will defer examination. The Strategic Plan
redefines patent pendency as the examination duration period. As a
result, under the first option the pendency measure is the same as
under the Business Plan--it begins from the date the patent application
is filed. However, under the second option pendency begins when the
examination fee is paid.
Table 1 shows USPTO‘s projections of patent pendency under three
scenarios using different assumptions. The first scenario shows the
Business Plan‘s pendency projections. The second scenario is based upon
the Strategic Plan where an applicant pays the filing fee and
examination fee at the same time, thus seeking immediate examination.
The third scenario is based on the Strategic Plan where an applicant
pays the filing fee and then defers examination. Regarding the third
scenario, the Strategic Plan notes that to determine the average total
pendency under the Strategic Plan (from the date an application is
filed to issue of a patent or abandonment of the application), 9 months
should be added to the plan‘s calculation to reflect the estimated
average examination deferral period. According to USPTO officials,
fewer months should be added in the early years. Table 1 shows for the
third scenario that when the deferral time is added, average pendency
from filing until patents are granted or applications are abandoned
would be longer under the Strategic Plan than under the Business Plan
for those applicants who elect to defer examination of their
applications. USPTO noted that the fiscal year 2008 difference between
the 18 months in the second scenario and the 27 months in the third
scenario is a measure of deferred examination.
Table 1: USPTO Projections of Patent Pendency under Different
Assumptions in the Business Plan and the Strategic Plan (Fiscal Years
2003-2008):
Fiscal year: 2003; USPTO projections of patent pendency (in months):
Business Plan: 27.3; USPTO projections of patent pendency (in months):
Strategic Plan (where applicant seeks immediate examination): 27.7;
USPTO projections of patent pendency (in months): Strategic Plan (where
applicant seeks deferred examination): 27.7.
Fiscal year: 2004; USPTO projections of patent pendency (in months):
Business Plan: 29.2; USPTO projections of patent pendency (in months):
Strategic Plan (where applicant seeks immediate examination): 28.1;
USPTO projections of patent pendency (in months): Strategic Plan (where
applicant seeks deferred examination): 28.1.
Fiscal year: 2005; USPTO projections of patent pendency (in months):
Business Plan: 27.8; USPTO projections of patent pendency (in months):
Strategic Plan (where applicant seeks immediate examination): 26.0;
USPTO projections of patent pendency (in months): Strategic Plan (where
applicant seeks deferred examination): 30.0.
Fiscal year: 2006; USPTO projections of patent pendency (in months):
Business Plan: 26.8; USPTO projections of patent pendency (in months):
Strategic Plan (where applicant seeks immediate examination): 22.7;
USPTO projections of patent pendency (in months): Strategic Plan (where
applicant seeks deferred examination): 31.7.
Fiscal year: 2007; USPTO projections of patent pendency (in months):
Business Plan: 25.5; USPTO projections of patent pendency (in months):
Strategic Plan (where applicant seeks immediate examination): 20.3;
USPTO projections of patent pendency (in months): Strategic Plan (where
applicant seeks deferred examination): 29.3.
Fiscal year: 2008; USPTO projections of patent pendency (in months):
Business Plan: No projection made; USPTO projections of patent pendency
(in months): Strategic Plan (where applicant seeks immediate
examination): 18.0; USPTO projections of patent pendency (in months):
Strategic Plan (where applicant seeks deferred examination): 27.0.
Source: GAO analysis of USPTO data.
[End of table]
* Patent examiners‘ responsibility for the search function on most
domestic applications would also be eliminated under the Strategic
Plan. Instead, with the exception of a new class of applicant--the
micro-entity--applicants would arrange for such searches by private
organizations, foreign patent offices, or others; USPTO would continue
to do searches for micro-entities.[Footnote 4] This change would allow
examiners more time to focus on the examination function. USPTO assumes
under the Strategic Plan that a portion of the patent examiners‘ time
will be refocused from non-examination to examination functions. USPTO
officials told us that most of the refocused time would result from
eliminating the search function. The detailed action plans supporting
the Strategic Plan show that eliminating the search function would
increase examiners‘ productivity between 5 and 20 percent.
* Almost 2,100 more new patent examiners would be hired under the
Business Plan than under the Strategic Plan--4,750 versus 2,688. This
difference reflects revised assumptions about new hires and the number
of examiners expected to leave. Under the Business Plan, USPTO expects
to hire 950 examiners and assumes a 10 percent attrition rate each year
during fiscal years 2003 through 2007. Under the Strategic Plan, USPTO
expects to hire 750 examiners annually for fiscal years 2003 and 2004
and 396 examiners annually for fiscal years 2005 through 2007. USPTO
assumes 11 percent and 8 percent attrition rates for fiscal years 2003
and 2004, respectively, and 9 percent attrition annually for fiscal
years 2005 through 2007. Fewer examiners would be required under the
Strategic Plan because fewer new applications are anticipated and
examiners would no longer be required to do the search function for
most patent applications.
* Patent fee restructuring would be implemented in fiscal year 2004
under the Business Plan, and by October 1, 2002, under the Strategic
Plan. There would be a one-time surcharge of 19.3 percent on patents
and 10.3 percent on trademarks in fiscal year 2003 under the Business
Plan, but no surcharge under the Strategic Plan. USPTO officials told
us that the restructured fees would need to be put in place earlier
than proposed under the Business Plan to compensate for the elimination
of the one-time surcharge and the expected decrease in patent
applications, and to implement changes proposed to improve quality and
reduce pendency.
* Fee collections and funding requirements projected for fiscal year
2003 in the Business Plan would be the same in the Strategic Plan--
$1.527 billion in fee collections and $1.365 billion in funding
requirements--but the specifics would change. For example, the
Strategic Plan‘s patent-funding requirements would increase by about
$27 million and trademark-funding requirements would decrease by the
same amount. Furthermore, projected funding requirements for fiscal
years 2003 through 2007 would total about $539 million less under the
Strategic Plan than under the Business Plan--$8.396 billion versus
$8.935 billion--as a result of changing assumptions, such as fewer
patent applications filed and fewer patent examiners needed. For fiscal
years 2004 through 2007, the Business and Strategic Plans both predict
that fee collections and funding requirements will equal each other.
Patent Fee Structure Would Change under Proposed Legislation:
There would be some significant changes in the patent fee structure
under legislation proposed on June 20, 2002. While the proposed filing
fee under the Strategic Plan would be lower than the current filing
fee, a new examination fee would be added and other fees would be
higher. In addition, some new fees would be established for such things
as surcharges authorized by the USPTO Director in certain instances.
For example, a surcharge could be charged for any patent application
whose specification and drawings exceed 50 sheets of paper. (See app.
I, p. 30.):
Generally, large entities would pay higher fees under the proposed
legislation. The current fee structure provides that large entities pay
a $740 patent filing fee that covers both the filing and examination of
the patent application. While the proposed legislation would have large
entities pay a $300 patent filing fee, it would also require applicants
that request examination (assumed by USPTO to be 90 percent of the
large entity applicants) to pay an additional $1,250 examination fee.
Patent issue fees would also be higher under the proposed legislation.
Consequently, a large entity that receives a utility patent would incur
a fee increase of nearly $1,200, or about 59 percent, over current
fees. Furthermore, the three fees to maintain the patent through its
useful life would be higher. If a large entity maintains the patent
through the payment of the three maintenance fees, the total fee
increase resulting from the proposed legislation would be nearly
$4,100, or about a 51 percent increase over current fees. (See app. I,
p. 31.):
Small entities also would pay increased fees under the proposed
legislation, as shown in table 2. Instead of paying a $370 patent
filing fee (50 percent of the $740 fee for large entities) that covers
both the filing and examination of the patent application under the
current fee structure, small entities would pay a $150 patent filing
fee (50 percent of the new $300 fee) under the proposed legislation.
However, small entities that request examination (assumed by USPTO to
be 90 percent of the small entity applicants) also would have to pay
the new $1,250 examination fee; with the exception of the new ’micro-
entity“ category, small entities would not get a discount on the new
examination fee. In addition, issue fees for small entities are also
higher. As a result, a small entity that receives a utility patent
would incur a fee increase of over $1,200, or about 121 percent, over
current fees. Furthermore, because maintenance fees are higher, if a
small entity maintains the patent through the payment of the three
maintenance fees, the total fee increase resulting from the proposed
legislation would be nearly $2,700, or about a 67 percent increase over
current fees.
Table 2: Example of How the Basic Patent Fees Would Change for a Small
Entity Granted a Utility Patent, and Maintaining the Patent through the
Three Maintenance Fees:
Type of fee: Filing; USPTO fee structure: Current fees for large
entities: $ 740; USPTO fee structure: Current fees for small entities:
$ 370; USPTO fee structure: Fees for small entities based on the
legislative proposal[A]: $ 150; Dollar change for small entities: $
(220); : (59.5).
Type of fee: Examination; USPTO fee structure: Current fees for large
entities: [Empty]; USPTO fee structure: Current fees for small
entities: [Empty]; USPTO fee structure: Fees for small entities based
on the legislative proposal[A]: 1,250; Dollar change for small
entities: 1,250; : [Empty].
Type of fee: Subtotal; USPTO fee structure: Current fees for large
entities: $ 740; USPTO fee structure: Current fees for small entities:
$ 370; USPTO fee structure: Fees for small entities based on the
legislative proposal[A]: $1,400; Dollar change for small entities:
$1,030; : 278.4.
Type of fee: Issue; USPTO fee structure: Current fees for large
entities: 1,280; USPTO fee structure: Current fees for small entities:
640; USPTO fee structure: Fees for small entities based on the
legislative proposal[A]: 830; Dollar change for small entities: 190; :
29.7.
Type of fee: Subtotal; USPTO fee structure: Current fees for large
entities: $2,020; USPTO fee structure: Current fees for small entities:
$1,010; USPTO fee structure: Fees for small entities based on the
legislative proposal[A]: $2,230; Dollar change for small entities:
$1,220; : 120.8.
Type of fee: Maintenance--3.5 years; USPTO fee structure: Current fees
for large entities: 880; USPTO fee structure: Current fees for small
entities: 440; USPTO fee structure: Fees for small entities based on
the legislative proposal[A]: 450; Dollar change for small entities: 10;
: 2.3.
Type of fee: Maintenance--7.5 years; USPTO fee structure: Current fees
for large entities: 2,020; USPTO fee structure: Current fees for small
entities: 1,010; USPTO fee structure: Fees for small entities based on
the legislative proposal[A]: 1,500; Dollar change for small entities:
490; : 48.5.
Type of fee: Maintenance--11.5 years; USPTO fee structure: Current fees
for large entities: 3.100; USPTO fee structure: Current fees for small
entities: 1,550; USPTO fee structure: Fees for small entities based on
the legislative proposal[A]: 2,500; Dollar change for small entities:
950; : 61.3.
Type of fee: Maintenance subtotal; USPTO fee structure: Current fees
for large entities: $6,000; USPTO fee structure: Current fees for small
entities: $3,000; USPTO fee structure: Fees for small entities based on
the legislative proposal[A]: $4,450; Dollar change for small entities:
$1,450; : 48.3.
Type of fee: Total; USPTO fee structure: Current fees for large
entities: $8,020; USPTO fee structure: Current fees for small entities:
$4,010; USPTO fee structure: Fees for small entities based on the
legislative proposal[A]: $6,680; Dollar change for small entities:
$2,670; : 66.6.
[A] Fee amounts shown represent a 50 percent reduction from the fees in
the legislative proposal, except for the examination fee that
specifically excludes any small entity discount. The amounts do not
consider any discount that may be applicable to a ’micro-entity“ since
USPTO has yet to define in regulations this type of applicant and the
fee structure applicable to such applicants. Information posted to
USPTO‘s web site on July 29, 2002, indicated that micro-entities would
pay a proposed $750 examination fee--a $500 reduction from the new
$1,250 examination fee. However, a USPTO official told us that the
agency is still studying the micro-entity concept and no final decision
has been made about the fee levels.
Source: GAO analysis of USPTO data.
[End of table]
Agency Comments:
We provided a copy of our draft report to USPTO for review and comment.
USPTO responded that the factual information in our draft report
provides a good picture of USPTO‘s transition to its new Strategic
Plan. USPTO added that the Strategic Plan is USPTO‘s road map for
creating, over the next 5 years, an agile and productive organization
fully worthy of the unique leadership role the American intellectual
property system plays in the global economy. In addition, USPTO
provided technical clarifications and corrections to our draft report,
which we incorporated as appropriate. USPTO‘s comments are presented in
appendix II.
Scope and Methodology:
To provide information on past and future USPTO operations, including
information on the number of patent applications filed, patents
granted, inventory of patent applications, patent pendency, patent
examiner staffing, and fee collections and funding requirements, we
reviewed key USPTO documents, such as its April 2001 Corporate Plan,
February 2002 Business Plan, and June 2002 Strategic Plan. We also
reviewed various budget documents, performance and accountability
reports, planning and other internal documents, and historical data
provided by the agency. In addition, we interviewed USPTO senior
management and other officials, as well as representatives of the
Patent Public Advisory Committee and the Patent Office Professional
Association.
Recognizing that a detailed examination of the Strategic Plan would be
premature until congressional action is taken on the fee legislation
proposal and USPTO‘s fiscal year 2003 budget request, we agreed to
identify some of the differences between the Business and Strategic
Plans.[Footnote 5] We compared selected aspects of those plans,
including key assumptions and proposed operating changes. We also
discussed with USPTO officials how USPTO develops projections of key
business indicators, such as pendency and funding requirements. For
example, we obtained information about USPTO‘s Patent Production Model,
which is a computer-based system that estimates staffing needs,
production, pendency, and other key business indicators for managerial
decisionmaking.
To determine how the current patent-fee structure would change under
the proposed fee legislation, we compared current fees with the June
20, 2002, fee legislation proposal. We obtained USPTO officials‘ views
on the accuracy of our analysis. In addition, we reviewed the results
of published analyses of the fee proposal by others, including the
American Intellectual Property Law Association and the Intellectual
Property Owners Association.
Although we did not independently verify the data provided by USPTO, to
the extent feasible we corroborated it with other agency sources. We
performed our work from April 2002 through July 2002 in accordance with
generally accepted government auditing standards.
As agreed with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 7 days
after the date of this letter. At that time, we will send copies to
appropriate House and Senate Committees; the Under Secretary of
Commerce for Intellectual Property and Director of the United States
Patent and Trademark Office; the Chief Financial Officer and Chief
Administrative Officer, USPTO; the Secretary of Commerce; and the
Director, Office of Management and Budget. This letter will also be
available on GAO‘s home page at http://www.gao.gov.
If you or your staffs have any questions concerning this report, please
call me on (202) 512-6225. Key contributors to this report included
John P. Hunt, Jr., Byron S. Galloway, and Don Pless.
John B. Stephenson
Director, Natural Resources and Environment:
Signed by John B. Stephenson:
[End of section]
Appendix I: Information Used in Briefings for the Chairman of the Joint
Economic Committee and Representative Lamar Smith:
This appendix contains the information used to brief the staff of
Representative Lamar Smith on July 12, 2002, and the staff of the
Chairman of the Joint Economic Committee on July 25, 2002.
[See PDF for image]
Source: USPTO.
[End of section]
Appendix II: Comments from the United States Patent and Trademark
Office:
UNITED STATES PATENT AND TRADEMARK OFFICE:
Under Secretary of Commerce For Intellectual Property and Director of
the United States Patent and Trademark Office Washington, DC 20231 www.
uspto. gov:
AUG 14 2002:
Mr. John B. Stephenson:
Director, Natural Resources and Environment United States General
Accounting Office 441 G Street N. W.
Washington, D.C. 20548-0001:
Dear Mr. Stephenson:
Thank you for the opportunity to review your draft report entitled
Intellectual Property: Information on the U. S. Patent and Trademark
Office‘s Past and Future Operations (GAO-02-907). The factual
information included in the report provides a good picture of the
United States Patent and Trademark Office‘s (USPTO) transition to our
new 21st Century Strategic Plan.
Comparing the Strategic Plan to the 2003 Business Plan is a little like
comparing apples and oranges. The 2003 Business Plan was focused on
performing our core functions - the processing of patent and trademark
applications - resulting in the highest quality of products and
services and the shortest pendency times possible. It deferred changes
to the fee structure until fiscal year 2004 and instead relied on the
Administration‘s proposed surcharge to generate the fee collections
needed to meet quality and pendency goals.
The Strategic Plan takes a global perspective by envisioning the patent
and trademark systems of the future that American innovators will need
to remain competitive around the world. It is built on the premise that
American innovators need to obtain enforceable intellectual property
rights here and abroad as seamlessly and cost-effectively as possible.
The Strategic Plan emphasizes the need for the USPTO to collaborate
with other intellectual property organizations in automation, global
patent classification, and mutual reliance on search results.
As you so aptly point out in your report, our Strategic Plan proposes
fundamental changes in the way we operate, such as restructuring the
patent fee schedule and redesigning the patent search and examination
functions. When implemented, our strategic plan will transform the
organization into a quality driven, highly productive, and cost-
effective organization.
The 21st Century Strategic Plan is the USPTO‘s road map for creating,
over the next five years, an agile and productive organization fully
worthy of the unique leadership role the American intellectual property
system plays in the global economy. The Plan is predicated on
behavioral
changes within the USPTO and a willingness to embrace change among all
players in the intellectual property system. The Plan pursues three
main
objectives. First, make USPTO‘s processes simpler, faster, and more
accurate. Second, listen more closely to the voices of USPTO applicants
and to the demands of the national and global marketplaces. Third, be
more productive while hiring 2,500 fewer examiners than was proposed
under the 2003 Business Plan --and spending half a billion dollars
less than originally planned.
Your report provides an extensive description of our legislative fee
restructuring proposal. It is essential, however, to understand the
dynamics behind the proposed fee changes. The existing fee structure is
inadequate --it is failing to serve applicants promptly, it is less
equitable to applicants who file more recently than earlier filers, and
it is less equitable to applicants who have modest complexity in their
applications.
The existing fee structure offers so much for a low flat fee that
applicants routinely overwhelm the system capacity. Applicants with
greater complexity consume more examiner resources, with no significant
difference in fees paid, as compared to applicants with lesser
complexity and who are able to obtain their desired patent protection
in a single application. Instead, the cost incurred by all is the
opportunity cost of delayed prosecution, as those earlier in the queue
and with greater complexity and volume disproportionally absorb
available examining resources.
The fee restructuring proposal would create parity among applicants --
those who consume less USPTO resources would pay lower fees. Fee
amounts also would be aligned so that we provide service when the
applicant has been able to decide that it is needed. This will allow
the Office to better allocate its examining resources among all
applicants in a more equitable alignment. We plan to work with the
Congress to achieve a fee structure that supports the goals and
objectives in our Strategic Plan, while not impeding full participation
of all potential applications in the intellectual property system.
In closing, let me say yes, our 21st Century Strategic Plan does
challenge the status quo and is aggressive and far-reaching, but
anything less would fall woefully short of what the times demand. I
have enclosed several minor suggested changes regarding the report for
your consideration.
Sincerely,
James E. Rogan:
Signed by James E. Rogan:
Enclosure:
[End of section]
FOOTNOTES
[1] In lieu of traditional budget submissions, in 1998 USPTO began
submitting corporate plans to the Congress that integrated the agency‘s
performance plan and budget. While these plans covered only the budget
year, they included selected performance information, such as pendency
and other workload data, for multiple years. USPTO officials said that
corporate plans were submitted in anticipation of USPTO becoming a
performance-based organization. USPTO became a performance-based
organization in 2000.
[2] Patent information in this report relates to ’utility,“ ’plant,“
and ’reissue“ patents issued by USPTO. Utility patents protect useful
processes, machines, articles of manufacture, and compositions of
matter; plant patents protect invented or discovered asexually
reproduced plant varieties; and reissue patents replace unexpired
defective patents.
[3] The Corporate Plan contained no staffing projections.
[4] The micro-entity category is referred to in USPTO‘s Strategic Plan
and legislative fee proposal. USPTO does not plan to define micro-
entities until legislation is enacted. At that time, USPTO will publish
proposed regulations related to micro-entities. Information posted to
USPTO‘s web site on July 29, 2002, indicated that micro-entities will
be a subset of ’independent inventors,“ with incomes below a specified
level. Independent inventors comprise about 18 percent of all patent
application filers.
[5] On June 26, 2002, the Senate adopted by unanimous consent an
amendment to H.R. 2047--An Act to authorize appropriations for the
United States Patent and Trademark Office for fiscal year 2002, and for
other purposes. The amendment changed the Act‘s title to ’An Act to
authorize appropriations for the United States Patent and Trademark
Office for fiscal years 2003 through 2008, and for other purposes.“
Among other things, the amended Act would (1) authorize USPTO‘s
appropriations for each fiscal year at an amount equal to the fees
estimated to be collected in each year, and (2) require annual reports
(for five calendar years after the Act‘s enactment) on the USPTO‘s
progress made in implementing the Strategic Plan and any amendments to
the plan. On July 18, 2002, the Subcommittee on Courts, the Internet,
and Intellectual Property of the House Committee on the Judiciary held
an oversight hearing focusing on the USPTO‘s proposed fee structure and
agency reform. Also, on July 24, 2002, the Senate Committee on
Appropriations adopted S. 2778--Departments of Commerce, Justice, and
State, the Judiciary, and Related Agencies Appropriations Act, 2003--
which provides $1.146 billion to the USPTO. This is a $219 million
decrease from the President‘s $1.365 billion budget request.
GAO‘s Mission:
The General Accounting Office, the investigative arm of Congress,
exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability
of the federal government for the American people. GAO examines the use
of public funds; evaluates federal programs and policies; and provides
analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO‘s commitment to
good government is reflected in its core values of accountability,
integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through the Internet. GAO‘s Web site ( www.gao.gov ) contains
abstracts and full-text files of current reports and testimony and an
expanding archive of older products. The Web site features a search
engine to help you locate documents using key words and phrases. You
can print these documents in their entirety, including charts and other
graphics.
Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as ’Today‘s Reports,“ on its
Web site daily. The list contains links to the full-text document
files. To have GAO e-mail this list to you every afternoon, go to
www.gao.gov and select ’Subscribe to daily E-mail alert for newly
released products“ under the GAO Reports heading.
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. General Accounting Office
441 G Street NW,
Room LM Washington,
D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov
Automated answering system: (800) 424-5454 or (202) 512-7470:
Public Affairs:
Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800 U.S.
General Accounting Office, 441 G Street NW, Room 7149 Washington, D.C.
20548:
